TV's Future? Disney Signs on for Ad-Skipping, Web-Based Pay TV

Dish Agreement Will Allow AutoHop After Three Days

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Dish Hopper's DVR
Dish Hopper's DVR

Dish Network and Walt Disney Co. announced new carriage agreement on Monday night that lays the groundwork for Dish to introduce a web-based TV service and protect its commercial-skipping technology from legal threat

The biggest takeaway for advertisers is that Dish has agreed to disable its AutoHop tech, which lets viewers skip ads in recorded programming automatically, if playback occurs within the first three days after an episode airs. The C3 window is all advertisers pay for at this point, although CBS Corp. Les Moonves and others have made noise about convincing advertisers to pay for a longer period of viewing.

Dish's Hopper DVR and its AutoHop feature has been a big point of contention for the Big Four broadcast networks. Disney's ABC as well as CBS, Fox and NBC have sued Dish regarding the ad-skipping functions, alleging copyright infringement.

Disney and Dish have now agreed to dismiss all pending litigation, including the AutoHop dispute, between the two companies.

CBS, Fox and NBC declined to comment on what the deal could mean for their lawsuits. "While we do not believe AutoHop is driving a measurable increase in commercial avoidance, the precedent is important," Bernstein Research analyst Todd Juenger wrote in a research note.

The deal is only the start for Dish and Disney, Mr. Juenger suggested, as networks look to monetize beyond the C3 window and move to C7.

It's unclear, however, whether the deal includes provisions to disable AutoHop for as long as seven days. "This is a good thing," a veteran media executive said. "But it seems shortsighted to do C3."

It's likely that other networks will look to strike similar deals with Dish, the media executive added, but the window for disabling AutoHop may vary depending on the financial terms of each arrangement and how much of an increase Dish is willing to pay for continued retransmission the networks' signals.

The financial terms of the Dish-Disney deal were not disclosed.

According Dish and Disney, the deal also provides structure for other advertising models, including mobile advertising, extended advertising measurement periods and dynamic ad insertion (an area where CBS also moved today).

Perhaps most intriguing, the agreement gives Dish the right to include ABC-owned affiliates and Disney cable networks in a web-based pay-TV service. Intel tried to build a service like that last year but despaired of securing the rights and sold the unit to Verizon.

Any such "over the top" service introduced by Dish would be designed as an "on-ramp" to pay TV for "cord nevers" who hadn't previously paid for cable or satellite, Mr. Juenger wrote, as opposed to "off-ramp" for cord-cutters.

Unlike Netflix, such a service is likely to include advertising, although Dish hasn't spelled anything out. "It is not clear what advertising will be included in the various streams, which in addition to national spots from the linear feeds, could include local spots for ABC, or conceivably, addressable IP-delivered targeted spots over time," Mr. Juenger wrote.

Dish and Disney had been quietly negotiating a new deal since September, but managed to avoid the kind of network blackout that damaged Time Warner Cable in its dispute with CBS last year.

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